Sunday, February 23, 2014

Roman soldiers bringing civilization to Dacia (from the Trajan column in Rome). The Roman empire invaded Dacia at the beginning of the 2nd century AD seeking the control of the Carpatian gold mines.

The ascent of the Roman Empire is best understood if we think of it as a beast of prey. It grew on conquest, by gobbling its neighbors, one by one, and enlisting them as allies for more conquest. By the first century AD, the Roman Empire had conquered everything that could be conquered around the Mediterranean sea; that for good reasons the Romans called “Mare Nostrum”, “Our Sea.” But the beast was still hungry for prey.

And what a beast that was! Never before, the world had seen such a force as the Roman legions. Well organized, trained, disciplined, and
equipped, they were the wonder weapon of their times. The great innovation that made the legions so powerful was
not a special weapon or a special strategy. It had to do,
rather, with a concept dear to the military: command and control. In the
Roman system, command and control was based on gold (and silver). The
Roman had not invented coinage, but they used systematically gold and silver coins to pay
their soldiers. So, the size of the Roman army was not limited by the
Roman population: almost anyone could enlist either as a legionnaire or
as an auxiliary fighter; his reward was simply money. Gold was, in a
sense, the secret weapon of the Roman Empire; it was the
the blood, the lymph, and the nerves of the beast of prey.

Because of its command and control system, the Roman army could grow in size by means of a self-reinforcing mechanism. The more gold the Romans had, the larger their army could be. The larger their army, the more gold they could raid from their neighbors. Also, the more gold the Romans had, the more they could invest in extracting more gold from their Spanish gold mines. The beast kept growing bigger and, the more it grew, the more food it
needed.

But even the mighty Roman legions had their limits. With the 1st century AD, the Spanish mines started showing signs of depletion. At the same time, the Empire had reached practical limits to its size and, with that, to the amount of gold it could loot from its neighbors. Already in 44 BC, the legions had been stopped at Carrhae in their attempt to expand in the rich East at the expense of the rival Parthian Empire. And in Teutoburg in 9 AD, a coalition of German tribes had inflicted a crushing defeat on the legions, stopping forever the attempt of the Romans to control Eastern Europe. There were no other places where the empire could expand: in the West, it faced the ocean; in the South, the dry Sahara desert. Confined in a closed space, the beast risked to starve.

Not only the Roman Empire couldn't get any more gold; it couldn't even keep the gold it had. The Roman economy was geared for war and it couldn't produce much more than grain and legions, neither of which could be exported at long distances. At the same time, the Romans had a taste for expensive goods that they could not produce: silk from China, pearls from the Persian gulf, perfumes from India, ivory from Africa, and much more. The Roman gold was used for pay for all of that and, slowly, it made its way to the East through the winding silk road in central Asia and from Africa to India by sea. It was a wound that was slowly bleeding the beast to death.

With less and less gold available, the legions' power could only decline. That the Empire was in deep trouble could be seen when, in 66 AD, the Jews of Palestine - then a Roman province - took arms against their masters. Rome reacted and crushed the rebellion in a campaign that ended in 70 AD with the conquest of Jerusalem and the burning of the Jewish Temple. It was a victory, but the campaign had been exceptionally harsh and the Empire had nearly gone to pieces in the effort. Nevertheless, the empire had managed to bring home a considerable amount of desperately needed gold and silver. The beast was eating itself but, for a while, it was satiated.

With the gold plundered in Palestine, the Roman Empire could gain some time, but the problem remained: where to find more gold? It was at this point that the Romans turned their sight to a region just outside their borders: Dacia, an area at the North-East of the Empire that included Transylvania and the Carpatian mountains. The beast was smelling food.

We don't know much about Dacia before the Roman conquest. We know that it was a thriving society that was expanding and that, probably, had ambitions of conquest of its own; so much that the Roman empire had agreed to pay to the Dacian kings a tribute. We know that the Carpatian region had been producing gold already in very ancient times and there is evidence (Bogden et al.) that, at the time of the Roman conquest, the Dacians were mining gold veins in the mountains. It may well be that they had learned new mining techniques from the Romans themselves. So, Dacia was probably experiencing a gold mining boom. It was a prey in the making.

The Dacians may have had plenty of gold at that time, but they were still building up their economy and their technology. The only gold coins that can be said to have a certain Dacian origin are a curious mix of Roman iconography and Greek characters spelling the term "Koson", whose meaning is uncertain. We don't know if these coins were actually minted in Dacia, although they were surely used there. It is possible that the Dacians had sent some of their gold to Rome, to have it transformed into coins and brought back in Dacia – not unlike what oil producers are doing today when they send their oil to the United States to be transformed into dollar bills. The Romans were surely happy to work the Dacian gold, but they must have noticed that the Dacian mines were producing it. So, it was clear that a military conquest of Dacia could pay for itself. The beast had sighted its prey.

In the year 101 AD, a young and aggressive Roman Emperor, Trajan, invaded Dacia. It was a bold attempt, given the difficult terrain and the strong resistance of the Dacians. Surely, the nightmare of the Teutoburg disaster of nearly a century before must have haunted the Romans but, this time, the legions overcame all obstacles. After two campaigns and five years of war, the gamble paid off and Dacia was transformed into a Roman province. The beast had made another kill.

We have no reliable data on how much gold and silver the Romans looted in Dacia, although it had to be a considerable booty. We also know that the Romans invested in the Dacian mines, probably bringing in their expert miners from Spain. However, the overall effect of this inflow of gold seems to have been small on the Roman economy. If we look at the data for the silver content of Roman coins (data from Joseph Tainter) there is no evident effect of the Dacian conquest. We see an increase in silver content at about 90 AD, but that's a decade before the Dacian campaign and we may attribute it, rather, to the inflow of precious metals deriving from the conquest of Palestine. The Dacian mines, apparently, couldn't match the wealth that the Spanish mines had been produced in their heydays. The beast had become too huge to be fed just with crumbles.

But the content of silver in coins doesn't depend only on the looting of foreign countries. It depends also on the policies of the government. So, if we look at the graph above, we see that both the Palestinian and the Dacian campaigns correspond to drops in the silver content of coins. That makes sense: of course the Roman government would see the advantage of debasing a little their currency when it was question of having to pay large numbers of troops. Trajan, indeed, didn't stand still after the conquest of Dacia and, in 113 AD, he attempted another bold project: that of expanding in the East, attacking once more the Parthian Empire after the failed attempt at Carrhae, in 44 BC. But the task was too much even for an expert commander as Trajan. After some initial successes, the Romans simply had to stop; possibly they understood that the campaign had become too expensive. Asia was just too big for them to conquer. The beast had found a prey too big to swallow.

With the death of Trajan in 117 AD, the new emperor, Hadrian, took the decision of stopping all attempts of the Empire to conquer new territories, a policy that was basically kept by all his successors. In a sense, it was a wise decision because it prevented the Empire from collapsing. But the final result was unavoidable as gold continued to bleed away from the Roman territory and could not be replaced. The Western Empire, which included the city of Rome, disappeared forever after a few centuries as an impoverished shade of its former self. The beast was to die of starvation, slowly.

And Dacia? Over nearly two centuries of Roman rule, it was "romanized", in the sense that it adopted Roman customs and the Latin language - at least in the cities. However, it was also one of the first Roman provinces to lose contact with the central government when, around 275 AD, the legions abandoned it (for comparison, Britannia was not abandoned before 383 AD). We have no data on gold production in Dacia during this period but the simple fact that the Romans decided to abandon the province means that the Dacian mines had been thoroughly depleted, just like the Spanish ones. There was no food left for the beast.

From then on, we have scant data. For sure, Dacia was exposed to all the invasions that were to sweep through Europe in the period we call “The Great Migrations”. Apparently, however, the region maintained its Roman roots better than Britannia. However, we have no records of a Dacian King who bravely fought the invaders, as King Arthur did in Britannia, and we don't have to think that Dacia always remained a Roman fortress. Indeed, the earliest records we have of the Romanian language go back only to the 16th century and we have no clear evidence that its origin went back all the way to the times of the Roman colonization. However, it is a fact that, still today, the region we call "Romania" - the land of the Romans - is a Latinized island in a Slavic sea. Were the gold mines still producing some gold during this period? We cannot say but, if they did, it may be possible that the wealth they generated, even though modest, helped to maintain the cultural and social unity of Dacia.

This brief survey tells us a lot of how important is gold in human history. For the region that we call Romania today, the gold mines located in Roșia Montană, in the Carpatian Mountains, have been a fundamental element. Exploited from remote times, these mines have periodically experienced new waves of exploitation as technological improvements made it possible to recover lower and lower grade gold ores. And with these cycles of boom and bust, there went invasions, migrations, kingdoms, and empires. The cycle is continuing today with a project to restart exploiting these ancient mines using the last technological wonder in gold mining: the cyanide leaching process. But getting more gold from the exhausted Carpatian mines is costly and the damage it could do to the land is tremendous. The drop in gold prices of the past few years may soon make these new gold mines too expensive even to be dreamed of. Even existing gold mines may have to be closed.

So, it looks like the beast of prey that, today, we call "Globalization" is facing the same problem that the old Roman Empire was facing in its times: the disappearance of the vital minerals it is preying upon (and gold is just one of them). Since today there are no perspectives of conquering unexploited lands, it is an unsolvable problem. The globalized beast will have to die of starvation, or it will survive only if it will accept to change its diet.

Sunday, February 16, 2014

I tend to think that much of what's happening around us nowadays can be explained if you see the social system as an ecosystem. We known that ecosystems have "food chains" or "trophic cascades". In a previous post, I argued that governments are behaving as top predators in the socio-economic system.

A problem with top predators is that - by definition - they have no mechanism to limit their numbers other than the availability of food. Since biological predators (and governments, as well) are not normally able to plan for the future, they tend to destroy their own source of food by excessive predation: it is called "overshoot". This phenomenon was studied already about one century ago by Lotka and Volterra who created the model that, today, is known with their names ("LV model" or, sometimes, as the "foxes and rabbits model"). Here is a typical run of the model:

You see oscillations due to predators going periodically in overshoot, that is killing too many preys and running out of food themselves. It is an oversimplification; of course. Real ecosystems are much more complex than a simple two-species system and do not normally show such regular oscillations. But the model still gives us some ideas of the forces at play and of how the behavior of predators may go out of control. Below, you see a run of the LV model (done using Vensim) where I've assumed that the prey does not reproduce; an assumption close to reality in an economic system based on non renewable resources. In the graph, I also show the predation rate. Note how this rate reaches a maximum when about half of the prey has been killed (in other contexts, this is called the "Hubbert law"). The point is that predators go on killing off of large numbers of prey without realizing that they are destroying their own source of subsistence.

It is, of course, a qualitative interpretation, but it seems to be telling us something when we realize that the top predator in our socio-economic system is the government in the form of one of its many agencies (the police, the judiciary, the internal revenue service, etc.). Take a look at the article below, from the New Yorker, and tell me if you don't get the impression of a predator gone on a rampage.

Under civil forfeiture,
Americans who haven’t been charged with wrongdoing can be stripped of
their cash, cars, and even homes. Is that all we’re losing?

On a bright Thursday afternoon
in 2007, Jennifer Boatright, a waitress at a Houston bar-and-grill,
drove with her two young sons and her boyfriend, Ron Henderson, on U.S.
59 toward Linden, Henderson’s home town, near the Texas-Louisiana
border. They made the trip every April, at the first signs of spring, to
walk the local wildflower trails and spend time with Henderson’s
father. This year, they’d decided to buy a used car in Linden, which had
plenty for sale, and so they bundled their cash savings in their car’s
center console. Just after dusk, they passed a sign that read “Welcome
to Tenaha: A little town with BIG Potential!”

They
pulled into a mini-mart for snacks. When they returned to the highway
ten minutes later, Boatright, a honey-blond “Texas redneck from
Lubbock,” by her own reckoning, and Henderson, who is Latino, noticed
something strange. The same police car that their eleven-year-old had
admired in the mini-mart parking lot was trailing them. Near the city
limits, a tall, bull-shouldered officer named Barry Washington pulled
them over.

He asked if Henderson knew that he’d been driving in the left lane for more than half a mile without passing.

No, Henderson replied. He said he’d moved into the left lane so that the police car could make its way onto the highway.

Were
there any drugs in the car? When Henderson and Boatright said no, the
officer asked if he and his partner could search the car.

The
officers found the couple’s cash and a marbled-glass pipe that Boatright
said was a gift for her sister-in-law, and escorted them across town to
the police station. In a corner there, two tables were heaped with
jewelry, DVD players, cell phones, and the like. According to the police
report, Boatright and Henderson fit the profile of drug couriers: they
were driving from Houston, “a known point for distribution of illegal
narcotics,” to Linden, “a known place to receive illegal narcotics.”

The
report describes their children as possible decoys, meant to distract
police as the couple breezed down the road, smoking marijuana. (None was
found in the car, although Washington claimed to have smelled it.)

The
county’s district attorney, a fifty-seven-year-old woman with feathered
Charlie’s Angels hair named Lynda K. Russell, arrived an hour later.
Russell, who moonlighted locally as a country singer, told Henderson and
Boatright that they had two options. They could face felony charges for
“money laundering” and “child endangerment,” in which case they would
go to jail and their children would be handed over to foster care. Or
they could sign over their cash to the city of Tenaha, and get back on
the road. “No criminal charges shall be filed,” a waiver she drafted
read, “and our children shall not be turned over to CPS,” or Child
Protective Services.
“Where are we?” Boatright remembers thinking.
“Is this some kind of foreign country, where they’re selling people’s
kids off?” Holding her sixteen-month-old on her hip, she broke down in
tears.

Later,
she learned that cash-for-freedom deals had become a point of pride for
Tenaha, and that versions of the tactic were used across the country.
“Be safe and keep up the good work,” the city marshal wrote to
Washington, following a raft of complaints from out-of-town drivers who
claimed that they had been stopped in Tenaha and stripped of cash,
valuables, and, in at least one case, an infant child, without clear
evidence of contraband.

Thursday, February 13, 2014

(Image from legacysecurity.com). The post below, by Dmitry Orlov, is the result of an exchange of e-mails about the similarities between the collapse of the Soviet Union (30 years ago) and the ongoing collapse of several Mediterranean countries, including Italy. Read Orlov's post to understand his interpretation of a phenomenon that I tend to see as the result of the behavior of the so called "Apex Predators" (or "Top Predators"). If you work with socioeconomic systems, you can't miss the similarity these systems show with ecosystems. In particular, in a socioeconomic system you can identify the top predator as the government; that is, the entity that controls the police and the army and which has the power of levying taxes on citizens without any specified limit. Now, in these systems, there exists a tendency of going in "overshoot", when a predator takes more preys than the capability of the prey population to reproduce itself, or when the preys destroy the resource on which they depend. In this case, the predator eventually destroys the prey population and, at that point, is left without resources and no other choice than disappearing in turn. Models show that, in this case, the top predator population is the last to disappear. That is, the government of a country tends to persist as long as citizens own something that can be taxed. But if the wealth of citizens depends on non renewable resources, such as fossil fuels, then in the long run most citizens are spoiled of everything they have and there remains nothing to tax for the government. At this point, we can see the government as a predator without prey: it has no other choice than to go extinct. It folds over and leaves; the state structure collapses and disappears. That could be a good interpretation of what's happening today in many countries. (UB)

by Dmitry Orlov

Douglas SmithZeus

Over the past half a decade I've made a
number of detailed predictions about collapse: how it is likely to
unfold, what its various manifestations are likely to be, and how it
will affect various groups and categories of people. But I have
remained purposefully vague about the timing of collapse and its
various stages, being careful to always append “give or take half a
decade” to my dire prognostications. I wasn't withholding
information or being coy; I really had no way of calculating when
collapse will happen—until five days ago, when, out of the blue, I
received the following email from Ugo
Bardi:

Hi Dmitry,
You may be interested
in this post of mine.
Starting from this post, I'm trying to draw
a parallel between the collapse of the Soviet Union and the impending
collapse of Italy. There are, as always, similarities and
differences. In particular, the Soviet Union collapsed almost
immediately after that oil production flattened out and started
declining. On the contrary, the Italian government survives despite a
loss of 36% in oil consumption.
My impression is that it is
all related to different taxation methods. I understand that the
Soviet tax system was based mainly on commodity taxes and on taxes on
production. When production stalled, people had nothing to buy and
the government had nothing to tax because most people owned nothing
and had little or no savings in banks. So, the government had no
choice but to fold over and disappear.
Instead, the Italian
system is based largely on income tax and property tax. The
government is losing revenues on commodity taxes (e.g. on gasoline)
but it can compensate with property taxes. Italians, on the average,
are “rich,” in the sense that they have savings in banks and most
of them own their homes. So, the government can tax their properties
and their savings. As long as Italians still have something taxable,
then the government will survive. It will disappear only when it has
managed to strip citizens completely of everything they have.
Do
you agree with this interpretation? (BTW, Italy as a state may be
even more culturally diverse than the old Soviet Union was.)
Ugo

I wrote back:

Hi Ugo,

Very interesting
article. Yes, the entire southern tier of the EU is in some early
stage of collapse, but so far it hadn't occurred to me to draw
parallels between it and USSR. Now that you mention it, the parallel
is obvious: it is financial collapse triggered by something having to
do with oil, but with polarities reversed, and delayed by a period of
wealth destruction.

In the case of USSR, taxation wasn't
really a source of government revenue. The national economy was based
on government ownership of everything, central planning and budgets,
and a system of assigning ministerial contracts to enterprises owned
by the ministries. The external economy was a matter of exporting
hydrocarbons in exchange for foreign currency, which was used to buy
grain—mostly feed grain for cattle, without which the population
would become protein-deprived and malnourished. Over the so-called
“stagnation” period of the 1980s the Soviet economy became
hollowed out because of several trends. Too much spending on defense
was one of them. Another was that investment in capital goods
(machinery, plant and equipment) reached the point of diminishing
returns, which is very difficult to characterize but not so difficult
to observe. Lastly, Solzhenitsyn and the dissident movement had done
irreparable damage to Soviet prestige, destroying morale. The coup
de grace, when it came, consisted of two pieces. One was the
inability to expand oil production given the state of Soviet oil
extraction technology of the era. The other was the fall in oil
prices, down to $10/bbl at one point, because North Sea and Alaska
both went on stream, and the Saudis pumped as much oil as they could
based on a tacit agreement with the US to depress oil prices and thus
crush the Soviets. In this they largely succeeded. The USSR became
heavily indebted to the West, and, at the very end, needed Western
credit to keep the lights on in the Kremlin. One of the final scenes
featured Gorbachev on the phone with [West Germany's Chancellor]
Helmut Kohl asking him to ask the Americans to release some funds.

Now, I can see parallels to this in
what is happening now in the US and in the EU, but with all the
polarities reversed: here oil flows in and money flows out, and the
coup de grace [will be] high oil prices rather than low.
Instead of failures of central planning, which failed to allocate
production effectively, we have failures of the globalized market,
where production is effectively globalized but consumption is
ineffectively localized among the wealthy and the formerly wealthy,
and has to be fueled by credit. Instead of diminishing returns from
deployment of capital goods, we have diminishing returns from
deployment of capital itself, where a unit of new debt now produces
much less than a unit of economic growth. The damage to reputation
and morale is mostly on the US side of the Atlantic, where in place
of Solzhenitsyn and the dissident movement we have Abu Ghraib
[scandal], [Wikileaks' Julian] Assange and [Edward] Snowden. With the
EU, most of the damage has to do with [the] experience of economic
disparities between the rich core and the increasingly impoverished
periphery, and the recent move in Ukraine to walk away from the EU,
and the ensuing Western-financed mayhem in Kiev, show that the bloom
is off the EU rose as well. The runaway military spending is likewise
mostly a US issue, although epic failures in Afghanistan, Libya and
Syria, in which the EU is complicit, are likely to have some effect
as well.

Comparing USSR to Italy is difficult
because of the disparity of scale: 1/5 of the planet's dry surface
versus a smallish peninsula; an economy that slowly decayed in
isolation versus an integral part of the EU; a country where the
choice is between burning hydrocarbons or dying of exposure versus
one where the choice is between riding a scooter or taking the bus; a
country with a ravaged agricultural sector unable to grow enough
protein calories versus a nation of foodies where corner groceries
make worthy subjects for oil paintings. But I think that when it
comes to the actual collapse, when it finally comes, there will still
be identifiable similarities. Financial collapse always comes first:
all sorts of financial arrangements unravel as the center becomes
unable to float the periphery, and in response the periphery starts
to withhold economic cooperation. The result is a breakdown in supply
chains, shutdown of production, and, shortly thereafter, shutdown of
commerce. In the case of the USSR, this unfolded in 1989-91 as the
various republics and regions refused to cooperate with Moscow. I
suspect that this will also happen in the EU, at some
point. But I think that you are exactly right that whereas the
average Soviet citizen could not be fleeced, Italy, and much of the
EU, still have plenty of fat sheep that the government can shear to
keep things running. Thus we are looking at a few more years of
steady decline before the lights start going out. This, then, is the
key distinction: the USSR collapsed promptly because it was already
skin and bones, whereas the US and the EU still have plenty of
subcutaneous fat to burn through. But they are, in fact, burning
through it. And so, the conclusion is, collapse will come, but here
it will take a little longer.

-Dmitry

Ugo responded:

I agree with you, of course. It makes
perfect sense to me and it is the main point I was making: the Soviet
government couldn't tax Soviet citizens too much because they owned
very little.

...

The Italian government instead has
some luck in the sense that Italians have some savings and most of
them own their homes. So, the government is progressively strangling
their citizens to squeeze out of them all that they have—while they
still have something.
The last round of tax increases in Italy
is targeting homes and it is really, really hurting, especially the
poor. You can be poor here, and still own a house that you inherited
from your parents. Now the government asks you to pay as if that
house were revenue! That is truly evil. People who don't have the
money to pay this property tax can only indebt themselves with banks
(or worse). Eventually, they'll have to sell their homes or give them
to the bank (or to the Mafia)—the result is disaster for everybody,
including for the banks, and even the government. But the whole thing
has a perverse logic. It has the advantage that it generates some
immediate cash which is badly needed, then the hell with the
future.
The [next] phase will be to target bank accounts.
Then, when there will be nothing left, the government will decamp and
say bye to everybody. Hell, what a planet I landed in.....
All
the best,
Ugo

And so here is the outline of the
method for calculating the timing of collapses:

1. Find out when the collapse clock
starts running by looking for a significant drop in energy
consumption

2. Calculate how long the clock is
going to run by dividing the total wealth of the citizenry by the
economic shortfall of the shrinking economy

For any industrial economy the collapse
clock starts running as soon as the consumption of fossil
hydrocarbons starts dropping appreciably. It is sometimes difficult
to tell whether this has already happened if the country in question
is still a major hydrocarbon producer. Gross production numbers can
still be holding steady or even seem to go up a bit, but once you
subtract all the energy that is being expended on energy production
itself, and on the unprofitable mitigation of its many undesirable consequences,
you might be able see a decline sooner rather than later. Notably,
the net energy yield, or EROEI, is very low for all the newer
unconventional sources that have been trumpeted as panaceas in recent
years, such as ones that require hydrofracturing and drilling in deep
water, tar sands and so on. (The so-called “renewables,” such as
wind, solar and biofuels, are an even bigger joke, because all of
them with the exception of hydroelectric plants have net energy that
is too low to sustain an industrial economy, plus they all depend on
technologies that are “nonrenewable” unless the country maintains
a vast industrial base which happens to run on fossil fuels.) And so
the drop in net energy consumption is clear for Italy, which produces
7% of the oil it consumes and imports the rest, whereas the picture
is somewhat less clear for the US, which still manages to supply
around a third of its oil.

Since all industrial economies
literally run on fossil fuels, lower energy consumption immediately
translates into a lower level of economic activity and a shrinking
economy. The gap between the expectations of economic growth
that are dialed into all of the financial arrangements, and the
reality of economic decline driven by lower energy availability, has
to be plugged with the population's savings. There are a number of
ways of expropriating wealth, generally proceeding from various kinds
of stealth taxation measures, to more overt measures, to outright
expropriation. Taking the US as the example (since I am most familiar
with it) the expropriation cascade is proceeding as follows:

1. Central bank policy of zeroing out
of interest rates on savings combined with massive money-printing.
This forces money into speculative markets (stocks, real estate,
etc.) creating huge financial bubbles; when these bubbles pop, savings are said to be destroyed, but in reality that money
has already been spent by the government or used to fill the private
coffers of those closely associated with the government.

2. Government policy of canceling
retirements or short-changing retirees. The federal government has
worked hard to make its official measure of inflation all but
meaningless so that it can justify its policy of making cost of
living adjustments to social security payments that are far less than
the the real increases in the cost of living. Another federal
expropriation scheme is via guaranteed student loans, which cannot be
discharged through bankruptcy, and which have created an entire class
of indentured servants. At the more local level, state and municipal
governments are curtailing or canceling retirement programs by virtue
of going bankrupt.

3. Ever more onerous reporting
requirements for financial transactions, especially for those who try
to leave the country and expatriate their savings. All foreign bank
accounts must now be reported, and people who work abroad are now
forced to file voluminous annual reports that cost thousands of
dollars to prepare. Those who decide to repudiate their US
citizenship are made to pay a hefty exit tax. Nevertheless, record
numbers of US citizens have been doing just that. Just having a US
passport often makes it impossible to set up accounts in foreign
financial institutions, which have little desire to comply with US
demands for financial disclosure.

These are the measures that are already
in place. Looking at what's been tried before, here and elsewhere, we
can see what other measures are in the works. Among them:

1. So-called “bail-ins” where
insolvent financial institutions are rescued by confiscating
depositor funds. We can expect the script to be similar to what
happened in Cyprus: politically connected depositors get word ahead
of time and yank out their money forthwith; everybody else gets
shorn.

2. Limits on bank withdrawals. You
might still “have” money in the bank, but that's the only place
you can “have” it. The semantics of the verb “to have” can be
quite tricky, you see...

3. Ever-increasing taxes on property
resulting in property confiscation. It works like this: government
prints money and hands it out to its friends; its friends use it to
temporarily bid up property values; property taxes go up to a point
where the property owners can't pay them; owners lose their
properties. A staggering 63% of real estate purchases in Florida last December were
cash purchases.

4. Various kinds of sudden, new,
super-complex regulations, noncompliance with which results in very
large fines. In turn, nonpayment of these fines results in forfeiture
of assets. The US has some very curious laws according to which
inanimate objects such as cars, boats and houses can be charged with a crime,
seized and auctioned off. We can expect lots more of such property
grabs in the future.

5. Gold confiscation, which happened
once in the US already, so there is a precedent for it. Yes, I know
that this will make a number of people upset, but I am yet to hear a
convincing argument for why the US government would not resort
to gold confiscation when that turns out to be one of the few remaining
cards it can play.

This list is by no means comprehensive. If you feel that I have missed
something major, please submit a comment, and I will consider it for
inclusion.

Now, it would be nice if all of these
measures worked like clockwork, always producing the right amount of
wealth confiscation to levitate the government, and the financial
scheme on which it is based, for a little while longer. Alas, as with
most things, something is bound to go wrong at some point, most
likely when you least expect it. And it seems like a dead
certainty that something will in fact go wrong well before every last
American citizen is relieved of every bit of their accumulated wealth
and is living peacefully in a roadside ditch, wearing an attractive
loincloth and a stylish mudpack for a hat, quietly perfecting a nouvelle cuisine that features snails au jus and dandelion salad au chaume.
Maybe you can imagine it, but I can't. Beyond a certain point, I can
only imagine reports of widespread “public disturbances” followed by
“breakdown of law and order.”

Still, I hope that this framework will
allow us to set an upper bound for how
long collapse can be deferred for any given country. Once hydrocarbon
consumption drops appreciably, the clock starts running. Then it is
possible to estimate how long the clock can theoretically run by
dividing the remaining net worth of the population by the size of the hole in
the economy created by falling energy consumption.

But after that things get messy. Some
countries will hollow themselves out quite peaceably, and go softly
into the night, while others will explode and fast-forward though the
financial-commercial-political collapse sequence. And so perhaps the
most useful thing to know is whether the collapse clock is already
running for any given country, because if it is already running, then it becomes a
fool's game to wait around for the inevitable outcome.

One reasonable approach is to get
another passport and quietly relocate to another country. It is
important that this country be one for which the collapse clock is
not running and won't be for a long time yet. Ideally this would be a
financially secure, politically stable, energy independent,
militarily invincible, underpopulated, non-extradition country which
will be among the last to be severely disrupted by climate change and
where you could have lunch with Edward Snowden. But this approach
doesn't appeal to everyone, and I understand that.

And so another approach is to adapt to
what's coming while remaining in the US, or in any other country for
which the collapse clock is running, by making yourself, and your
wealth, should you have any, illegible. Here is a very
nice article by one smart cookie by the name of Venkatesh Rao on the
concept of illegibility. And here
is his very nice primer on being an illegible person. This kind
of illegibility has nothing to do with bad handwriting; it is about
hiding in plain sight. Please read these as homework, because I will
have more to say on this topic in the near future. And I would love
to see a list of countries for which the collapse clock is running,
along with first-order estimates for how long it could possibly run
for each one, based on their population's net worth and the country's
economic shortfall. But since this post has just gone over 3000
words, I am leaving this as an exercise for the reader.

Monday, February 10, 2014

My work on the problem of mineral depletion is reported mainly in the upcoming book "Extracted", published by Chelsea Green (click here for a description). At the same time, I am also publishing more in-depth examinations of the depletion question in scientific journals. Here is a recent one published in "Frontiers in Energy Systems and Policy". The title "The Mineral Question" echoes Jevons's 1866 paper titled "The Coal Question." Jevons examined coal depletion in light of the principle of diminishing returns and this paper of mine does the same for the general depletion problem. In the end, it is all a question of net energy (or "energy return on energy invested, EROEI). The diminishing EROEI of fossil fuels is spilling to all sectors of the economy, including the mining industry, causing increasing costs which add up to the problems caused by the depletion of high grade ores. There follows the abstract, to read the full paper (open access) click here

Front. Energy Res., 24 December 2013 | doi: 10.3389/fenrg.2013.00009

The mineral question: how energy and technology will determine the future of mining

Almost 150 years after that Jevons (1866)
published his paper “The Coal Question” a debate on mineral depletion
has been ongoing between two main schools of thought: one that sees
depletion as an important problem for the near future and another that
sees technology and human ingenuity as making depletion only a problem
for the remote future. Today, however, we have created intellectual
tools that permit us to frame the problem on the basis of physical
factors, in particular on the basis of thermodynamics. The present paper
examines the problem of mineral depletion from a broad viewpoint, with a
specific view on the role of energy in the mining and production
processes. The conclusion is that energy is a fundamental factor in
determining how long we can expect the supply of mineral resources to
last at the present prices and production levels. The rapid depletion of
our main energy resources, fossil fuels, is creating a serious supply
problem that is already being felt in terms of high prices of all
mineral commodities. Technology can mitigate the problem, but not solve
it. In a non-remote future, the world’s industrial system will have to
undergo fundamental changes in order to adapt to a reduced supply of
mineral commodities.

Click here to read the full paper "Frontiers in Energy Systems and Policy"

Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014). His most recent book is "The Seneca Effect" to be published by Springer in mid 2017

Listen! for no more the presage of my soul, Bride-like, shall peer from its secluding veil; But as the morning wind blows clear the east,More bright shall blow the wind of prophecy,And I will speak, but in dark speech no more.(Aeschylus, Agamemnon)

Ugo Bardi's blog

This blog is dedicated to exploring the future of humankind, affected by the decline of the availability of natural resources, the climate problem, and the human tendency of mismanaging both. The future doesn't look bright, but it is still possible to do something good if we don't discount the alerts of the modern Cassandras. (and don't forget that the ancient prophetess turned out to be always right).

Above: Cassandra by Evelyn De Morgan, 1898

Chimeras: another blog by UB

Dedicated to art, myths, literature, and history with a special attention to ancient monsters and deities.

The Seneca Effect

The Seneca Effect: is this what our future looks like?

Extracted

A report to the Club of Rome published by Chelsea Green. (click on image for a link)

Rules of the blog

I try to publish at least a post every week, typically on Mondays, but additional posts often appear on different days. Comments are moderated. You may reproduce my posts as you like, citing the source is appreciated!

About the author

Ugo Bardi teaches physical chemistry at the University of Florence, in Italy. He is interested in resource depletion, system dynamics modeling, climate science and renewable energy. Contact: ugo.bardi(whirlything)unifi.it